Under Internal Revenue Code Section 436, which was added by the Pension Protection Act of 2006 (“PPA”), calendar year defined benefit pension plans must be amended by December 31, 2012. Section 436 provides a series of limitations on the accrual and payment of benefits under an underfunded plan.

The provisions of Section 436 apply only to significantly underfunded pension plans. However, all defined benefit plans must be amended to reflect these benefit restriction provisions. The amendment period was extended by the Internal Revenue Service from 2009 to the last day of the first plan year that begins on or after January 1, 2012, i.e., December 31, 2012, for calendar year plans.

Most plan sponsors adopted PPA amendments in 2009. Those PPA amendments may not have included the benefit restrictions required by Code Section 436 because the IRS extended the deadline for adopting the benefit restriction amendments.

In December 2011, the IRS issued Notice 2011-96, which included IRS model language as a safe harbor for the Code Section 436 provisions. Even employers who previously adopted the Code Section 436 benefit restriction provisions with their PPA amendments should consider amending their plans to adopt the IRS’ safe harbor model language. Upon an IRS audit or the next IRS determination letter application review, the adoption of this safe harbor language will be helpful and will avoid the risk that an amendment adopted to comply with Code Section 436 does not actually comply with the Internal Revenue Code requirements. Of course, for those plans that have not adopted Code Section 436 benefit restriction provisions at all, the safe harbor model language should be adopted in a timely manner.

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Photo of Monique Warren Monique Warren

Monique Warren is a Principal in the White Plains, New York office of Jackson Lewis P.C. Ms. Warren is a member of the Employee Benefits Counseling, Executive Compensation, Benefits Litigation and Workplace Privacy Practice Group.

Ms. Warren counsels employers on employee benefits compliance…

Monique Warren is a Principal in the White Plains, New York office of Jackson Lewis P.C. Ms. Warren is a member of the Employee Benefits Counseling, Executive Compensation, Benefits Litigation and Workplace Privacy Practice Group.

Ms. Warren counsels employers on employee benefits compliance and administrative matters, drafts plan documents and employee communication materials, and represents employers to government agencies and in employee benefit litigation. Her expertise includes health and welfare plans as well as retirement plans.

Ms. Warren has spoken at numerous client and professional association events including SHRM and WEB meetings. She also has presented numerous seminars on employee benefits compliance topics including benefits basics for human resource professionals, HIPAA privacy and security, 409A requirements, and annual legal updates.

Prior to joining the firm in 2006, Ms. Warren was a member of the employee benefits group of a large Chicago law firm and later maintained her own practice in Illinois, representing employers in employee benefits, employment and employment-related immigration matters. While attending law school, she was an intern in the tax clinic at Loyola University Chicago School of Law and was a judicial extern for the Honorable Blanche Manning, Federal District Court, Northern District of Illinois. As a law student, she received academic honors and was a member of the moot court employment law team.

During the ten years prior to attending law school, Ms. Warren directed human resource functions in manufacturing and research enterprises. She was certified as a Senior Human Resource Professional by SHRM in 1996.